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January 9 - 15, 2009 CBD 14 www.independentweekly.com.au news In the pantheon of fi nancial performances, 2008 was an absolute stand-out for all the wrong reasons. The biggest losers… T he year that got off to an unattractive start looked downright hideous as the months wore on. Debt, the magic wand-turned-ugly stick in the world of finance, contin- ued to beat a path through Australia’s corporate sector. No company with a highly leveraged balance sheet was good-looking enough to fend off this ugly stick. By the end of the year, the debt crisis had morphed into potentially the biggest economic shock since the close of the silent film era. The good news, however, was that Refl ux has had little difficulty compiling the year’s list of losers hit by the new fi nancial ugly stick. It was a little harder finding some winners. And now the 2008 honours list, drum roll and a paper bag please… LOSERS ALLCO FINANCE GROUP The fi nancial engineer proved you can still be a fi nancial basket case and report a solid profi t. The David Coe-headed company pooh-pooed any notion it was in trouble at the start of the year. In late February, it released its half-year results, where it reported an $84 million profit. The results also contained, ahem, the admission by Allco that a $900 million debt facility originally due to be repaid in September 2009 was now required to be repaid within 90 days. Along with another $250 million of debt. A few days later, the company conceded a $1.9 billion error was made in its 2007 full-year accounts. Within a week, Coe jumped ship. The company went on to post a $1.74 billion full-year loss. In November, the corporate undertakers were called in. On New Year’s Eve, it was curtains. BABCOCK & BROWN Babcock & Brown Limited pro- moted itself as a pillar of strength as its rival Allco Finance was imploding. “We don’t have HITs and misses and things like that,” crowed Babcock’s head leverager Phil Green in February, in reference to Allco’s downfall, along with some of its satellites such as Allco HIT. Then in mid-June, Babcock conceded it was seeking a reprieve from its bankers over the review of a $2.8 billion debt facility that was triggered by the massive fall in its shares. In August, Green was replaced by Michael Larkin and a restructure plan which involved selling two of its fi ve businesses. But in November, Babcock announced plans to sack 1000 staff and jettison two of its three businesses to help pay debts. By the close of trade on New Year’s Eve, Babcock shares had dipped 99.43 per cent for the year. BRISCONNECTIONS The yet-to-be-built Brisbane toll road project was possibly the most disastrous sharemarket listing since the Romans decided to build a road network more than 2000 years ago. Listed by Macquarie Group at $1 each – in the fi rst of three tranches – securities in the toll-road slumped to 0.1 cents by year’s end. The slump at least provided a Melbourne housewife, Fang He, the chance to make a mark in the corporate world. She snapped up 8.26 per cent of Brisconnections, or 32.3 million shares, for a cool $32,300. It was unclear if she was aware her investment obliged her to fork out a further $65 million for the next two $1 instalments in the company, but she sold her stake weeks later. ABC LEARNING The company charged with looking after tens of thousands of toddlers and sandpits found it too hard to look after its balance sheet. All appeared well late in 2007, when ABC’s founder, Eddy Groves (above), said the company had refi nanced a $1.4 billion debt facility. But into last year, it was clear that things were going down the potty. By March, it was forced to sell a 60 per cent stake in its US child-care centres and soon after a margin call saw Groves lose his stake that was once worth $300 million. He was left with $4683 in shares. At least ABC was on the money about one thing. Its corporate slogan: “So much more than child care!” Wealth Mentoring “We mentor you to do it yourself” • Wealth Mentoring & Coaching • Investment Education based on long term investment methodologies • Investment Books -The Long Term Investor -The Sensible Australian Investor Business Perspective Investing Pty Ltd ABN: 82 098 857 928 117 Queen St Norwood S.A.5067 Phone: 08 83331544 Fax: 08 83331744 Email: mark.wylie@wylie.com.au Web: www.thelongterminvestor.com Authorised Representative of APT Strategy Pty Ltd A.F.S.L. No: 226898 ASCIANO GROUP The debt-laden ports and rail concern Asciano Group spearheaded the arrival of a new business concept. The idea that to growyou sell your prized assets. “We are entering a very signifi cant growth phase for Asciano as a business,” the group’s chief financial officer, Peter McGregor, declared after the company posted a $182 million full-year loss. The growth, he said, would be funded by selling $1 billion worth of assets. After fending off a takeover “bid” from Texas Pacific, its shares closed the year down 78 per cent to $1.51. Asciano’s market capitalisation is now the same size as its funding shortfall – $1 billion. The good news was that CEO Mark Rowsthorn scored a $1.3 million “cash incen- tive”. MFS LIMITED It did not take long for things to unravel for the Gold Coast property and investment group MFS Limited. Barely a minute into a phone hook-up with analysts and journalists in January, its managing director, Michael King, appeared to get the message that his plans for a $550 million equity raising to “reduce indebtedness” had not gone down too well. “I think it’s all over, Michael,” was one stockbroker’s Oz Minerals reached new, unwelcome depths in 2008. Photo: Stephen Gray response. By the end of the phone hook-up, MFS shares had crashed, ending the day 69 per cent lower. The next day, King fell on his sword. The next Monday, MFS Limited was placed in a trading halt. Neither the sale of the group’s Stella tourism business nor a change in its name to Octaviar Limited was enough to keep the creditors at bay. Chairman AndrewPeacock was beaten in a game of chicken with “shareholder” Chris Scott, who wrestled control of the board. Scott’s old chum Jenny Hutson’s Wellington Capital then secured control of MFS’s largest mortgage fund. Then the administrators came in. OZ MINERALS The mining company formed by the merger of Oxiana and Zinifex showed mining companies were not immune from the credit crisis. In September, OZ Minerals attempted to quell concerns over its falling share price in a letter to shareholders. “The outlook for demand for all the commodities we produce remains strong and, although there will be some volatil- ity from one period to the next, we are very confi dent of ongoing growth in demand for many basic commodities,” explained the letter. OZ shares stopped trading two months later, after falling more than 80 per cent since the merger. By December, OZ had closed one of its mines inherited from Zinifex’s $860 million takeover of Allegiance in May and was desperately trying to fl og its assets. It was given a two-month extension to an $800 million debt facility in the fi nal days of the year. PROPERTY TRUSTS The fi nancial ugly stick had its most devastating impact on the property trust sector. Not one company owning a shopping centre, offi ce building or residential estate appeared to be immune, as heavy- weights such as Valad and FKP neared cardiac arrest by the end of the year with debt clogging their arteries. The ASX 200 Property Index fell 60 per cent for the year. At least shareholders showed some generosity, with property groups such as Goodman manag- ing to raise additional equity to prop up their ailing balance sheets. Goodman’s founder, Greg Goodman, also managed to get shareholders to approve his new 7 million share-option package, despite the 80 per cent fall in his company’s share price. COMMANDER COMMUNICATIONS The former Telstra subsidiary started the year with a turnaround plan involving 550 jobs cut to help it handle its $335 million of bank debts. But things never picked up. In February, Commander Communications reported a $245 million half-year loss and argued its workforce had somehow been “newly energised”. In June came a profi t downgrade and in August came the receivers.